Monday, January 26, 2015

What's the direction?

When it comes to my very short short term trades, entered shortly before earnings are published, the whole panoply of mathematical brouhaha -- the implied volatility, the ranges based on standard deviations of that volatility, the percentiles of the recent range, the odds of expiring out of the money, the risk/reward ratio -- none of it means a thing unless I get the direction right.

As recent experience as shown, sometimes that's easier theorized about than done in practice.

I've been chart-based entirely up to now. I'm changing that, beginning with the Tuesday, Jan. 27 analysis, to

  • a score based on the Zacks Investment Research rating (2 for most bullish, 0 for neutral, -2 for least bullish), 
  • the sign (positive or negative) of my enthusiasm index (which is calculated from the various levels of analyst ratings), 
  • the sign of the percentage of analyst ratings that are the most bullish (the Strong Buy ratings), 
  • and two trends: On the 30-day chart and the one-day chart (1 for uptrend, -1 for downtrend). 
Adding those together gives me score. Positive is bullish, negative is bearish.

This is still a work in progress, so if some elements don't ring true, then I'll make a judgement call.

In other words, In beta.

-- Tim Bovee, Portland, Oregon, Jan. 26, 2015


My shorter-term trading rules can be read here. My longer-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here. My volatility trading rules can be read here.


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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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